This transportation fuel has a potential role in a zero-carbon future, but what about retail?

 

By Roy Strasburger

With all the talk about electric vehicle charging recently, I’ve been giving a lot of thought to what the future of fuel retailing may look like. As total hydrocarbon fuel consumption goes down, the simple math is that there will be fewer total gallons sold at current gasoline locations.

There is going to be a retail market for electric charging, but no one really seems to know how big the opportunity is going to be, where retail EV charging stations should be located and what a sustainable business model looks like. EV charging competition will include private homes, parking garages, shopping centers, restaurants, office spaces and any place that has a parking space. “Refueling” a vehicle will no longer be based on having a piece of property that can accommodate two or three 10,000 gallon tanks. All a charging site will need is access to a power line.

Other alternative fuels are out there (and contributing to the decrease in the total hydrocarbon gallons sold), such as methane, propane and compressed natural gas (CNG). The one that seems to run second to electricity now is hydrogen. Hydrogen is one of the most abundant elements on the planet, but it is not found in its pure form. To generate energy, hydrogen needs to be separated from other atoms. Usually, this is done through a process called electrolysis to split the atoms within a molecule of water. To develop green hydrogen, you would use electricity generated from a green source, such as solar or wind power, to separate the hydrogen and oxygen molecules in water, creating pure hydrogen and oxygen.

While hydrogen can be burned in its pure form to create energy, the most energy efficient way of using hydrogen is with a fuel cell—basically a small electricity generation device. This process creates an electric charge for cars and its only emission is water.

The refueling time for a hydrogen tank is not that much longer than for a petroleum tank and is significantly shorter than fully charging an EV.

There are several challenges with hydrogen:

  • There are not very many fuel cell cars on the road. According to the International Energy Agency’s 2023 report, there are only 15,000 fuel cell light vehicle EVs in the United States. That is not much of a market to support an infrastructure.
  • Hydrogen in its natural form is not energy dense. Therefore, it needs to be compressed to provide sufficient energy density. The lack of energy density means that vehicles will have to have large storage tanks onboard to supply the fuel cell to prevent range anxiety. While this may be an obstacle with light vehicles, larger trucks and buses should be able to accommodate the larger storage tanks.
  • Since hydrogen is not energy dense, it requires an infrastructure to compress and maintain hydrogen under pressure. Hydrogen can be transported either by truck or pipeline, but it needs a pressurized storage unit, not dissimilar in size to a petroleum storage facility—except that it is above ground—to provide hydrogen to the consumer. These refueling stations will look very similar to our current gasoline stations.
  • Pure hydrogen is very flammable. (Remember the Hindenburg?) Having said that, reports suggest that using hydrogen as a fule is not significantly more dangerous than using gasoline as a fuel. While hydrogen has a lower ignition point than gasoline. it dissipates faster, since it is a gas. Bottom line, all fuels need to be treated with caution.
  • The installation of a hydrogen fuel station costs between $1.4 and $3 million dollars, according to the U.S. Department of Energy. That’s a lot of money when there are so few hydrogen vehicles on the road.

My take, now, is that hydrogen will be an important fuel for fleets of heavy-duty vehicles such as buses and 18-wheelers. These vehicles can have the storage capacity to handle range issues and they will benefit from the short refueling time. Having a dedicated hydrogen-fueled fleet will make sense when installing a hydrogen station. Ultimately, the main hydrogen fuel retailers will be those companies that can secure long term contracts with fleet owners in either an urban refueling site near bus and truck hubs or at truck stops where the long-distance fleets can refuel.

Hydrogen’s biggest impact will likely be as a way to transfer energy—capturing the energy created by solar or wind power in remote places through the electrolysis and compression process and then being shipped by pipeline, truck or ship to electricity power plants, where it can be used as a green fuel.

Ultimately, hydrogen’s role as a retail fuel will likely be small, so think carefully about investing in a hydrogen station unless you have a solid agreement with the owner of hydrogen-fueled bus or truck fleet.

 

Roy Strasburger is the CEO of StrasGlobal. For 35 years StrasGlobal has been the choice of global oil brands, distressed assets managers, real-estate lenders and private investors seeking a complete, turn-key retail management solution.